My husband has expressed some interest in purchasing a 6-unit apartment building nearby and being in charge of it. He's a handy guy, so could do a lot of maintenance himself. And he's very smart about money, too. In our preliminary talks about this, we are trying to get a realistic picture of what being a landlord would be like. Do any of you have any insights about this? Is it worth the effort, or more trouble than it's worth?
Really the best way to do it is if you can pay cash for it (you might have to start with something smaller). I did the "landlady gig" and it was a real pita.
It IS a lot of trouble. At least if you don't "rely on the rent to pay the loan--it would be way more manageable! Good luck. Real estate is always a great investment...IF you can afford it!
I haven't read the other responses so I am probably going to repeat. Firstly, don't go into things relying on rent to make any payments related to the rental units. If you need to rely on the rent to make a mortgage payment or to pay contractors then you could easily find yourself in a pickle when your tenants don't pay the rent. 2. Know your tenant base and write your lease accordingly. If you are in the middle of Crackville, USA then expect to rent to crackheads. If you are renting to college students make sure you have a parental guarantor, etc. 3. Make sure you know the rental laws in your area and make sure everything is up to code. The first time you have an angry tenant or someone who doesn't pay rent expect someone to call the code office to try to start trouble. 4. With a 6 unit complex, expect tenant complaints that you will have to resolve. No one is going to tell you that they fight nightly with their girlfriend or that they like to start partying at midnight on Friday and don't end the party until 2 PM Sunday but your other tenants will bring it to your attention quickly. 5. Do not expect your security deposit to cover all damages that may occur. 6. Realize that if you have to sue your tenants you will probably win but that doesn't mean you will end up with any money in your pocket. It is hard to get blood from a rock. 7. Seriously consider whether you will allow pets. Yes, they can be destructive but you also could discount a lot of excellent renters who are unwilling to abandon their pets.
Good luck.
It can be trouble, but not always or all the time. Of course, not all renters are jerks but you can end up with one. Some renters will take advantage of an absent landlord. Talk to a realtor if you know one. Ask about it in detail. My realtor gave me great tips. Make sure you have an application requirement. This helps weed out people that don't want to give you info. Always get a copy of the person's driver's license or state ID--no work IDs. Require copies of their paystubs. Even direct deposit provides some proof of what you are being paid. One tip from the realtor is if someone wants to see the apartment, they must call 1 hour before the meeting time to confirm that they will show up. If they don't call, they are not serious about it. If they do not feel comfortable giving you the access to pull a credit check, let them get their own from annualcreditreport.com. Do a criminal check on them also. This only costs about $12. All adults living in the apartment must provide info. Do not use a generic lease. You can type up your own lease but it must not discriminate or be unreasonable. Get a generic lease and build up from there. I have a 2 flat that I live in. My lease specifically states no smoking. We have had bad tenants and good ones. It is kind of luck of the draw I guess. Also be prepared to have a vacant apartment for a few months. The average was 3 months but not sure now since renting is really taking an upswing.
and document all expenses so you ca ndeduct them from the income you would be receiving.
Just remembered. Since this is a 6 unit and you will not live there, find out if there are tenant ordinances in the city where the building is located. A lot of cities has them for 5 or more units.
So you know how if you own a house and something breaks you are in charge of fixing it? Well imagine that you are now responsible for your house plus all the toilets, sinks, heating/cooling units, appliances, etc at another 6 houses and you'll get a clear picture of owning a 6 unit apartment building. Of course you know the habits of your family but you'll have no control over your 6 tenents so when they feel like taking a shower at 3 am and have no hot water you'll get that call. And when someone plugs up the toilet at 5 pm and you are just sitting down for dinner you'll get that call. Snow removal during the middle of a storm of the century because someone has to go to work. Yup you'll get that call too.
Then there's the excuses on why their rent is late. Which you would believe except as they are telling you that they had their work hours cut you notice that there's a new $3,000 flat screen tv hanging in their livingroom. Or when they move out and it takes you an entire month just to get the apartment acceptable to be rented which is money out of your pocket because of course they used their deposit as the last month's rent. Good luck recouping that lost money because even if you take them to small claims court and get a favorable ruling you still have to get them to pay.
In the last 30 yrs we've hard some wonderful renters who we loved and some awful people who somehow managed to pass themselves off as responsible humans during the interview process. I've taken to going with my gut feeling about people when I meet them. If something seems off then nope sorry I'm not going to rent to you. It's worked out better that way since the ones who look great on paper turn out to be the ones with the most issues.
On the plus side there's income and some possible tax breaks.
On the negative side there's:
upkeep / maintenance
If you've got good renters, they are easy.
If you've got tenants from hell - they'll make you wish you were never born.
late rent, property damage, vermin, police visits, drunken/doped brawls, pet troubles, bickering between tenants, people who sub-let (more of a problem if you are not there to keep a direct eye on the place), squatters (won't move out and won't pay rent), squabbling about parking spaces - the list goes on and on.
We rent out our older house and our first tenants worked construction and proceeded to park their company construction vehicles/equipment all over the street and yard. Since we're the property owners, the county was sending us notices of violations caused by them. We almost had to call a repo man to tow away abandoned vehicles.
Obviously people do it. There are rental properties everywhere.
Check out "Property Management for Dummies" and read it before you make a decision.
Good luck!
i wouldnt do it if you had to have the money each month to pay the mortgage on it. so it being a 6 unit maybe half of it you don't need the other half goes towards the mortgage. the stress from paying the bill alone would make me not want to do it. make sure you have a renters agreement and stick to it. don't let the people think they can get away with anything or they will try for even more. make sure you instill a late payment fee. a pet deposit if you are willing to allow them in the first place. if there are chimneys or carpet make them get them professionally cleaned yearly even if they dont use them or they dont seeem dirty. i'd say no smoking but that's up to you. when doing the walk throughs look in their cars....the cleanliness of their cars is a good insight to how they keep their homes...your home. oh and don't rent to family and friends. they seem to think they can walk all over us the most.
Make sure you have enough money to cover the mortgage for at least 6 months if one or more tenants don't pay their rent, or if a unit goes unoccupied. Also, check into the eviction laws in your state. The process could take months in some states. When the washer machine broke in our property the tenants wanted to replace it with top of the line product. We told them that according to the lease, we only had to replace with comparable items, no better no worse. They complained about everything and wanted everything replaced not fixed. But our lease said that if we could fix it would be fixed not replaced. So I guess what I'm saying is to make sure the wording of your lease is very specific, but still follows the law. We only had one apartment, so we did it on our own. If I was buying a 6-unit building, I would have a lawyer do all the work with the sale and the leases. Also, look into Section 8 laws in your state to see if that is something you have to deal with. My best suggestion would be a lawyer.
Hell comes to mind-you cannot imagine how unintelligent people are when they live in a property that they don't have a vested interest in-but it can be done. Remember, too, laws are no longer crafted in favor of the landlord-a problem tenant can be difficult to get rid of!
For me, its more trouble than its worth. We are landlords who dont know how to do repairs ourselves and we charge too little for our rental house. If we were ruthless and handy it would be quite to our benefit.
I have a lot of family members who own rental units or apartment or multiple condo units.
You will need A LOT of extra time in the front end to make sure the units are suitable for rent. Meaning working appliances and clean and freshly painted and newer flooring. That's for lower end unit. Then if they are high end units and you want top dollar you'll need nice upgrades like granite counters, etc.
THE MOST IMPORTANT decision you have to make, that you must not waiver on, is you MUST rent to only people with good credit. NO SOB stories. You'll be doomed if you ever once let your heart get the best of you. You must do your research and check every applicant's rental history to ensure they were decent citizens who left their last place in a orderly fashion, without neighborly complaints, etc. And you must check employment and at least 3 references.
If you don't, be forewarned, the general public who does not pass these tests will destroy your units.
